The First Facility Management Blog

The Institute of Real Estate Management (IREM®) announced that its online course on “Sustainable Real Estate Management” (SRMOO1) has been approved for continuing education credit for LEED Professionals by the U.S. Green Building Council (USGBC). With the acceptance of the course, IREM becomes an approved USGBC Education Provider. Education Providers are third-party organizations offering the highest-quality education that has been peer reviewed and endorsed by USGBC.

“IREM Members are committed to adopting sustainable building operating practices to help ensure that the properties they manage are environmentally sound, healthy places to live, work and shop,” said IREM President O. Randall Woodbury, CPM®. “USGBC’s recognition of the value of our green course in fostering sustainability and promoting efficient energy management both reflects and reinforces that commitment.”

“Sustainable Real Estate Management” also is eligible for elective credit toward the NATIONAL ASSOCIATION OF REALTORS® (NAR) Green Designation. Those interested in earning this designation must be active members of NAR (either as a REALTOR® or Institute Affiliate member) and maintain membership in the Green REsource Council, founded by the Real Estate Buyer’s Agent Council (REBAC), a NAR subsidiary, to broadly disseminate knowledge about green real estate practices.

“Sustainable Real Estate Management” was designed and developed with IREM Member-experts in sustainable, or “green” real estate management. The course focuses on common sense, cost effective ways to meet owner, tenant, and resident demand for “green” real estate and increase a property’s NOI through sustainable real estate management techniques. Requiring approximately six hours to complete, it is self-guided and features open enrollment, enabling in individuals to begin and return to it at any time.

Specific topics addressed include:

• Sustainable property operations;
• Increasing energy efficiency;
• Increasing water efficiency;
• Improving indoor environmental quality (IEQ);
• How to reduce, reuse, and recycle; and
• The sustainable real estate management company.

For more information and to register, click this link.

Total collections for suburban office complexes nationwide in 2008 increased a slight 1.3% from 2007 levels to $19.56 per square foot of net rentable area. In contrast, those for downtown properties experienced a double-digit rise of 10% to $21.84 per square foot. Total actual collections for downtown properties were 11.7 percent more last year than their suburban counterparts.

These are among the major findings reported in the 2009 edition of the Income/Expense Analysis®: Office Buildings, a new benchmarking study published by the Institute of Real Estate Management (IREM®). This annual research study, conducted by IREM® since 1976, analyzes operating income and costs for 1,850 private-sector office complexes—some containing multiple buildings—in major metropolitan areas and regions in the United States. It is designed to help property owners, facility managers, investors, appraisers, lenders, developers, and other real estate professionals evaluate their buildings’ performance and prepare budget and revenue projections, feasibility studies, etc. The income and expense data is presented in dollars per square foot for more than 50 specific categories broken out by building size, height, age, and rental range.

Total Operating Costs Rise Modestly
Total operating costs for suburban buildings in 2008 rose 4.4% from the prior year to $8.84 per square foot of rentable area, while operating costs for downtown properties increased 9.1% to $10.29 per square foot.

Nationally, net operating costs for suburban buildings increased a relatively slight 3.4% to $6.40 per square foot of rentable area in 2008 vs. 2007, whereas those for downtown properties increased 8.7% to $7.50 per square foot.

Key Expense Comparisons
All major expense categories for suburban properties rose last year except for insurance/services, which declined 3.6% and administration/benefits costs, which remained the same. Real estate and other taxes saw the largest increase, 9%, followed by utility costs, up 4.5%, and janitorial/ maintenance services, up 2.8%.

Without exception, all major expense categories for downtown properties increased last year from the year prior. Real estate and other taxes rose 7.7% from 2007, janitorial/maintenance costs increased 7.1%, utility costs increased 7%, and insurance/services rose 5.8%.

Focusing again on major expense categories, but as a percentage of total operating costs, the IREM® study reveals janitorial/maintenance services along with real estate and other taxes accounted for the largest portion of suburban properties’ operating costs, 24.5% each. Utilities represented 23.9% and administrative/benefits and insurance/services represented 12.3% and 12.2%, respectively.

Similarly, expenditures for janitorial/maintenance services and real estate and other taxes accounted for the largest portion of downtown properties’ operating costs, 26.4% and 24.4%, respectively. Utilities represented 22.3% and insurance/services and administrative/benefits accounted for 12.3% and 12.2%, respectively.

Overall, downtown properties proved 14.1% more costly to operate in 2008 than their suburban counterparts, with all expense categories less than those experienced by suburban buildings.

Vacancy Rates Rise For Suburban Buildings; Remain Stable For Those Downtown
The national vacancy rate for suburban office properties in operation for 12 months rose 2% in 2008 vs. 2007, whereas the rate for downtown properties remained the same. The 2008 vacancy level for suburban properties was 7%; that of downtown properties was 5%.

Median operating ratios: Though downtown properties reported higher total actual collections than suburban properties in 2008, the overall operating experience of both downtown and suburban office markets were similar as reflected by their median operating ratio (total operating costs divided by total actual collections). The median operating ratio at suburban properties was 0.45, while the operating ratio at downtown properties was 0.47.

The 282-page Income/Expense Analysis®: Office Buildings is available for $419.95 (plus $15.50 shipping and applicable state sales tax). The IREM member price is $209.95 (plus shipping and handling). To order, contact the IREM Customer Service Department at (800) 837-0706, ext. 4650. Internet users can order the study in soft cover or in a downloadable format by accessing the Publications section of the IREM Web site.

A just released survey sponsored by the Institute of Real Estate Management (IREM®) and funded jointly by IREM and the NATIONAL ASSOCIATION OF REALTORS® (NAR), sought to identify current and emerging legal/liability issues impacting real estate management professionals.

The survey queried IREM members in leadership positions with their organizations about legal problems confronting them and their industry colleagues, and elicited perceptions about the impact of current economic conditions on these problems. An analysis of upwards of 700 relevant cases decided over the past two years as well as related legislative and regulatory activities during the same period were also included in this independently conducted survey.

IREM president Pamela W. Monroe, CPM®, explaining the rationale for the survey, stated: “A while back, IREM members identified ‘risk management’ as one of several critical issue affecting today’s real estate management industry (others included troubled properties, sustainability, technology, workforce development, and business competition). We undertook the survey to help our members and industry colleagues’ better address proliferating risk management challenges in their business practices, thereby enhancing their performance on behalf of the owners, investors, and other constituents they serve.”

Top Concerns Now: Debt Collection, Slip and Fall Disputes, Frivolous Lawsuits
The most significant current legal problems survey respondents identified are those relating to the day-to-day business of managing properties. Debt collection is a major area of concern, with 69% of respondents stating that it was a significant source of current disputes. Among the economic factors adversely affecting debt collection activities, said respondents, are the large numbers of retailers going out of business, growing lease defaults, and increasing numbers of residential tenants losing their jobs.

“Slip and fall” accidents and frivolous lawsuits, cited by 69% and 44% of respondents, respectively, also rank as top causes of current disputes. As with debt collection, many respondents believe the economic downturn is exacerbating both types of disputes. Some suggest that the depressed economy will lead more people to try to cash in on slips and falls. Others suggest that opportunists looking for easy money target landlords in frivolous suits, hoping to cheat the system in these hard economic times. Similarly, events on a property—situations in which a landlord or manager is blamed for a crime perpetrated by a third party—which ranked right under frivolous lawsuits as a key concern, is linked strongly to the recessionary environment. Some respondents cited the lack of jobs and other adverse economic conditions as reasons for the increasing the crime rate. Others observed that as the economy continues to decline, areas that were once rarely affected (by crime) have now been hard hit.

Issues On The Horizon: Wrongful Termination and Fair Housing
When asked to predict which problems would become more significant over the short term—the next two years—survey respondents again cited debt collection, frivolous lawsuits, slips and falls and events on a property. One employment issue—wrongful termination—also is seen to be increasing in importance.

By comparison, when the respondents were asked to rank potential future issues, several fair housing issues—handicap discrimination, advertising and target marketing, familial status discrimination, and race and religious discrimination—ranked at the top of, or high on, the list.

Training Needs Identified
Survey respondents also weighed in on where additional training may be needed to deal better with key legal issues and concerns. Their responses generally track the key issues identified in other parts of the survey, with training needs in the areas of debt collection and slip-and-fall incidents topping the list. Training also is perceived to be quite important to better handle issues related to potentially libelous occurrences on properties other than slips and falls; also, employee defamation and wrongful termination, and aspects of fair housing.

Key Findings Of Case Law And Statute Analysis
Following are some top-line survey findings:

• Debt Collection: Most of the 22 cases examined were dismissed or ended with a summary judgment for the defendant. The defendant was found liable in only case.
• Slip-and-Fall: 261 cases and jury-verdict reports were analyzed. In the 185 cases in which liability was determined, the landlord or management company was found not liable 70% of the time. The finding of no liability was made before trial in 22% of all cases. And most cases (56%) in which the defendant was found not liable required a trial. This is unusual as most cases involving other premises liability issues that decided for the landlord or management company did not require trials.
• Crimes on a Property: 61 case law and jury verdict reports were examined. In the 43 cases in which liability was determined, the landlord or management company was found not liable 77% of the time, most often without a trial.
• Condition of Tenant’s Premises: Although survey respondents did not indicate a significant number of current disputes in this area, the case-law survey indicated otherwise. Some 212 relevant cases were decided over the past two years. In cases in which liability was determined, the landlord or management company was found not liable 60% of the time. Moreover, the findings of no liability were made before trail in 28% of all 212 cases. No trial was required in 73% of the cases in which the defendant was found not liable. (On a separate but related note, the most common situations giving rise to large verdicts and settlements for landlords and real estate managers arose in residential settings and involved lead-based paint, fires, and dangerous dogs.)

About IREM
The Institute of Real Estate Management (IREM®) is celebrating its 75th anniversary in 2008. IREM has been the source for education, resources, information, and membership for real estate management professionals. An affiliate of the National Association of Realtors®, IREM is the only professional real estate management association serving both the multi-family and commercial real estate sectors. With 80 U.S. chapters, eight international chapters, and several other partnerships around the globe, IREM is an international organization that also serves as an advocate on issues affecting the real estate management industry.

The wide array of career opportunities in real estate management are detailed in new, generously illustrated, 25-page brochure published by the Institute of Real Estate Management (IREM®).

In a 2007 survey conducted by CNN and Careerbuilder.com, property/real estate management was listed among America’s top 40 careers. A year earlier, in a survey of the top 50 careers in America conducted by Money magazine and Salary.com, the position of property manager was ranked number 23. Both surveys considered job growth, average salary, education need, and working conditions in the rankings.

According to IREM President Pamela W. Monroe, many real estate management professionals are reaching retirement age in the near future, so real estate owners and investors must increasingly seek replacements for them. “This demographic reality,” said Monroe, “combined with a management function that has become more complex and sophisticated, has created an almost perfect storm that is boosting demand as never before.”

The brochure provides answers to key questions that students and others seeking a rewarding career path may have including:
—–What a real estate manager does
—–The kinds of positions available in the field
—–Categories of employers who hire real estate managers
—–How to prepare for positions in the field
—–Scholarships and internships available
—–How to actually find employment
—–How much one can expect to earn

To request a free copy of this brochure, send an e-mail to tfm@groupc.com with the words “CAREER BROCHURE” in the subject line.

“With more and more distressed commercial real estate assets expected to come on stream as a result of serious liquidity and other problems, the need for superior real estate management, marketing, and leasing skills — and a proven record of performance — will become increasingly and acutely apparent,” said IREM® President Pamela W. Monroe, CPM®. “Our nation’s economic viability requires real estate management professionals with top-notch credentials to inject value back into distressed properties by protecting income streams, controlling expenses, positioning and/or repositioning them to deliver the best possible ROI and, ultimately, to command the best possible price when they are sold.

“Indeed,” Monroe added, “highly skilled real estate managers, by virtue of their professional education and experience, know how to deal with properties in transition as well as the formidable challenges of a down economy. Simply stated, they know how to salvage, maintain, reshape, and remarket what is expected to be an enormous pool of troubled real estate assets.”

Monroe reports that IREM recently convened a group of some of its volunteer leaders who experienced the real estate market turmoil of late 1980s and early 1990s and asked them to share their observations relative to today’s financial crisis. Here are some of their thoughts:

• The culprit that triggered the S&L crisis of the early 1990s was overbuilding; too much supply; not enough demand.
• Today’s culprit is excessive leverage and unrealistic appreciation expectations.
• While real estate is cyclical, not all property types are at the same place in the cycle at the same time. One property type may be doing well while another may be suffering from overbuilding.
• The starting point for managers when dealing with distressed properties, no matter what the circumstances, is to analyze them for best use — this could mean short- or longer-term — based on the owner’s goals.
• Advice should be property specific and location specific.
• The end product of comprehensive research and analysis should be a management plan that carefully details all aspects of the property and includes an analysis of marketplace dynamics; identification of the property’s problems and challenges; identification and analysis of possible solutions; and, finally, a recommended solution that reflects the owner’s goals.
• The “devil is in the details” and thinking “out-of-the-box” is essential.

“IREM believes in the power of knowledge and the importance of sharing it,” said Monroe. “So the organization has identified distressed property member experts for each key property sector. These experts will serve as information resources for the IREM membership community and the industry at large.”